Describe the legal and regulatory limitations regarding the types of entities and individuals that may own a controlling interest in a bank. What constitutes ‘control’ for this purpose?
Ownership restrictions and implications
Controlling interest
There are no restrictions on the types of entities and individuals that may have a controlling interest in a bank in Ghana. Both companies and individuals, regardless of whether they are domestic or foreign, may acquire an interest in a bank.
A person acquiring a stake of at least 5 per cent in the equity of a bank is deemed as a significant shareholder. Thus, that person will be required to seek consent from the Bank of Ghana (BoG).
The BoG is given power to restrict the ownership of a person in a bank or to cap ownership at a certain percentage for all or some types of owners.
Foreign ownership
Are there any restrictions on foreign ownership of banks?
There are no restrictions on foreign persons owning banks in Ghana.
Implications and responsibilities
What are the legal and regulatory implications for entities that control banks?
Where the entity is a financial holding company (parent) of the bank, it shall register with the BoG. The BoG may waive this registration requirement for a foreign bank provided it is satisfied that bank is subject to supervision on consolidated basis in another country.
The entity is expected to invest in companies that are individuals in financial services. It will be precluded from acquiring an interest in a commercial, agricultural or industrial company or unincorporated entity.
Such entities are required to seek consent from the BoG before they can acquire control (directly or indirectly) in any entity of another financial group.
Apart from financial holding companies, there are generally no restrictions on the acquirer of an interest in a bank. A bank may be partly owned by a person whose business activities are wholly non-financial in nature.
What are the legal and regulatory duties and responsibilities of an entity or individual that controls a bank?
An entity or individual that controls a bank must comply with the provisions on transfer of shares affecting shareholding set out in the Banks and Specialised Deposit-Taking Institutions Act. An approval of the proposed transaction must be sought from the BoG.
What are the implications for a controlling entity or individual in the event that a bank becomes insolvent?
No specific consequences have been prescribed for a controlling entity or individual. Consequently, the treatment will be the same as any shareholder. They may have to rely on the receiver for possible payment after all priority claims have been paid.
Changes in control
Required approvals
Describe the regulatory approvals needed to acquire control of a bank. How is ‘control’ defined for this purpose?
In order to acquire control of a bank in Ghana, an application for approval must be filed with the BoG three months before the date of the proposed transaction. The BoG has up to six months from receipt of notice to consent or object to the proposed acquisition of control or agreement to transfer shares. In practice, the approval process can be shorter if the appropriate disclosures have been made.
The supervisory thresholds that require notification to the BoG for an approval as to an acquisition are 5, 10, 20, 30, 50 or 75 per cent of the shares of the bank.
If the acquirer is a foreign bank, it must seek consent from its home supervisor to the effect that it has no objection to the proposed transaction, otherwise the BoG will not approve it.
Apart from the BoG, an approval is required from the SEC where the acquisition is a takeover or merger or amalgamation of a publicly traded bank.
‘Control’ is defined as where a person or a group of persons acting in concert (directly or indirectly):
- owns at least 25 per cent of the voting rights;
- has the power to appoint or remove the majority of the members of the board of directors;
- exercises a significant influence on the management or policies; or
- has the ability to direct the activities of the person so as to affect the financial returns on any investment made with the person.
Foreign acquirers
Are the regulatory authorities receptive to foreign acquirers? How is the regulatory process different for a foreign acquirer?
Yes. The regulatory authorities are receptive to foreign acquirers. The nationality of an acquirer or the place of incorporation of the acquiring company is not relevant. There is no discrimination in the process for approval.
Under what circumstances can a foreign bank establish an office and engage in business? For example, can it establish a branch or must it form or acquire a locally chartered bank?
A foreign bank may register a representative office or branch in Ghana, or it may incorporate a private limited liability company in Ghana. Establishing a foreign bank as a representative office is uncommon. Since January 2019, there have been three licenced and authorised foreign banks operating as a representative office or branch in Ghana.
Where the bank is a foreign SDI, it cannot establish a representative office in Ghana. A foreign bank may set up a representative office in Ghana when it does not want to accept any form of deposits from customers.
It shall not transact in any form of deposit taking or other business in Ghana. It shall only be in the country to provide information or perform liaison functions on behalf of the foreign bank.
In order for a foreign bank to establish a representative office, prior written consent must be sought from the BoG. The BoG will issue a certificate of approval when it is satisfied, together with a consent letter, to establish a representative office.
On the other hand, a foreign bank may incorporate a subsidiary in Ghana where it plans to accept deposits from customers. A foreign SDI is required to incorporate in the country. It will be expected to satisfy the minimum capital requirement for a bank in order to be licensed.
Factors considered by authorities
What factors are considered by the relevant regulatory authorities in an acquisition of control of a bank?
The BoG will consider the factors set out below in deciding whether to consent to, or refuse a sale of business, mergers or amalgamations or reconstructions:
- the financial resources of the acquirer;
- a copy of the proposed share sale and purchase agreement;
- the experience and management capabilities of persons of the acquirer;
- the background of the acquirer;
- the source of the funding;
- the impact of the proposed transaction on competition;
- the risk exposure to stability of the financial system;
- the convenience and the needs of the community;
- the effective of the existing bank to comply with compliance requirements; and
- whether the proposed transaction does not amount to money laundering and terrorist financing.
Filing requirements
Describe the required filings for an acquisition of control of a bank.
The first step is to submit an application for approval on a prescribed form to the BoG. The form should be supported with the following documents:
- a certified copy of the regulations and incorporation documents of the acquirer;
- the names, addresses and occupations of the persons including corporate affiliations of significant shareholders and their respective values of shares;
- the sources of funds for the acquisition;
- a letter from the home country of the acquirer’s supervisor that it has no objection to the proposed transaction in Ghana;
- a statutory declaration by each director of the acquirer that they have not been declared bankrupt, qualified from practising a profession or convicted of an offence by a court or subject to insolvency proceedings; and
- corporate governance policies of the acquirer.
The BoG, having received this notice, may require additional information or documents that it deems appropriate.
Timeframe for approval
What is the typical time frame for regulatory approval for both a domestic and a foreign acquirer?
The time frame for regulatory approval is the same for both domestic and foreign acquirer.
